Correlation Between Liberty Broadband and Broadwind

Can any of the company-specific risk be diversified away by investing in both Liberty Broadband and Broadwind at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Liberty Broadband and Broadwind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liberty Broadband and Broadwind, you can compare the effects of market volatilities on Liberty Broadband and Broadwind and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Liberty Broadband with a short position of Broadwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Broadband and Broadwind.

Diversification Opportunities for Liberty Broadband and Broadwind

-0.62

Correlation Coefficient

Liberty Broadband  Broadwind

Excellent diversification

The 3 months correlation between Liberty and Broadwind is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Broadband and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and Liberty Broadband is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Liberty Broadband are associated (or correlated) with Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of Liberty Broadband i.e., Liberty Broadband and Broadwind go up and down completely randomly.

Pair Corralation between Liberty Broadband and Broadwind

Assuming the 90 days horizon Liberty Broadband is expected to generate 1.11 times more return on investment than Broadwind. However, Liberty Broadband is 1.11 times more volatile than Broadwind. It trades about 0.16 of its potential returns per unit of risk. Broadwind is currently generating about 0.0 per unit of risk. If you would invest  5,450  in Liberty Broadband on September 4, 2024 and sell it today you would earn a total of  2,500  from holding Liberty Broadband or generate 45.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Liberty Broadband  vs.  Broadwind

Liberty Broadband

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Liberty Broadband reported solid returns over the last few months and may actually be approaching a breakup point.

Broadwind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadwind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Broadwind is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Liberty Broadband and Broadwind

The main advantage of trading using opposite Liberty Broadband and Broadwind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Broadband position performs unexpectedly, Broadwind can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Broadwind will offset losses from the drop in Broadwind's long position.

The idea behind Liberty Broadband and Broadwind pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.